Sumoylation has emerged as a major post-translational modification of cellular proteins, affecting a variety of cellular processes. Viruses have exploited the sumoylation pathway to advance their own replication by evolving several ways to perturb the host sumoylation apparatus. However, there has been no report of virally encoded enzymes directly involved in catalyzing the sumoylation reaction. Here, we report that the K-bZIP protein encoded by Kaposi's sarcoma-associated herpesvirus (KSHV) is a SUMO E3 ligase with specificity toward SUMO2/3. K-bZIP is a nuclear factor that functions to modulate viral gene expression and to prolong the G1 phase, allowing viral transcription and translation to proceed at the early stage of infection. In addition to functioning as a transcriptional factor, we show that K-bZIP carries a SIM (SUMO-interacting motif), which specifically binds to SUMO-2/3 but not SUMO-1. K-bZIP catalyzes its own SUMO modification as well as that of its interacting partners such as the cellular tumor suppressor proteins p53 and Rb, both in vitro and in vivo. This reaction depends on an intact SIM. Sumoylation of p53 leads to its activation and K-bZIP is recruited to several p53 target chromatin sites in a SIM-dependent manner. In addition to the identification of a viral SUMO-2/3 E3 ligase, our results provide additional insights into the mechanisms whereby K-bZIP induces cell cycle arrest.